Jensen v. Traders & General Ins. Co.

• Decision Date: 23 October 1959
• Citation: 52 Cal.2d 786,345 P.2d 1
• Court: California Supreme Court
• Parties: Raymond H. JENSEN et al., Appellants, v. TRADERS & GENERAL INSURANCE COMPANY (a Corporation), Respondent. S. F. 20212.

Page 1

345 P.2d 1

52 Cal.2d 786

Raymond H. JENSEN et al., Appellants, v. TRADERS & GENERAL INSURANCE COMPANY (a Corporation), Respondent.

S. F. 20212.

Supreme Court of California, In Bank.

Oct. 23, 1959.

Sheridan, Hoffman & Mendel, Nichols, Williams, Morgan & Digardi and Edward M. Digardi, Oakland, for appellants.

Partridge, O'Connell, Partridge & Fall, Partridge, O'Connell & Partridge, and Wallace O'Connell, San Francisco, for respondents.

Stanley Mosk, Atty. Gen., Harold B. Haas, Deputy Atty. Gen., Bronson, Bronson & McKinnon, San Francisco, Betts, Ely & Loomis, Early, Maslach, Foran & Williams, Moss, Lyon & Dunn, Snow & Holle, Veatch, Thomas & Carlson, Spray, Gould & Bowers, Frank Woodhead, Henry F. Walker, Los Angeles, Perry H. Taft, San Francisco, Watters & Donovan, James B. Donovan, Patrick J. Hughes, John N. Reid, New York City, and Weinstock, Anderson, Maloney & Chase, San Francisco, amici curiae for respondent.

McCOMB, Justice.

From a judgment in favor of defendant after trial before a jury in an action to recover upon an accident insurance policy, plaintiffs appeal.

Facts: On April 19, 1951, John DiMatteo signed a conditional sales contract for the purchase of a used car for his minor son, plaintiff Vincent DiMatteo. The contract contained a request that the sellor obtain insurance in a company acceptable to it and include the premiums therefor in the balance due under the contract.

Defendant, upon the request of the seller, issued its policy of public liability and property damage insurance, naming plaintiff Vincent DiMatteo and his father as insureds. The DiMatteos received the policy by mail and read it to check the coverage, but did not read the fine print. All premiums were paid from May 1951 through November 1951.

The policy contained, among others, this provision: 'This policy may be canceled by the named insured by surrender thereof or by mailing to the company written notice stating when thereafter such cancelation shall be effective. This policy may be canceled by the company by mailing to the named insured at the address shown in this policy written notice stating when not less than five days thereafter such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice and the effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing.'

On August 10, 1951, two separate notices of cancellation of the policy were placed in the mail, one addressed to plaintiff Vincent DiMatteo and the other to his father. Neither of these letters was ever returned to defendant's office. Both DiMatteos testified that no cancellation notices were ever received by them and that they had no knowledge of any cancellation until November 1951.

On November 15, 1951, Vincent had an automobile accident, in which plaintiffs Jensens and Morrow were injured. A few days later, Vincent and his father learned that the policy had been canceled.

Plaintiffs Jensens and Morrow filed an action against Vincent and served him with summons and complaint. The DiMatteos retained attorney Bernard Mendel to represent them. He made demand upon defendant by telephone to defend the action and later sent a copy of the complaint and summons to defendant with a further demand to defend, which was refused. A judgment in the sum of $10,000 was entered against Vincent in favor of plaintiffs Jensens and Morrow.

The present action was then filed against defendant predicated upon the insurance policy that it had issued. After trial, a verdict was returned in favor of plaintiffs, but the judgment rendered thereon was reversed on appeal. (Jensen v. Traders & Gen. Ins. Co., 141 Cal.App.2d 162, 296 P.2d 434.) After a second trial before a jury, a judgment in favor of defendant was entered. Plaintiffs appeal, urging that it was error for the trial court to give this instruction to the jury:

'When a policy of insurance provides as in this case that the policy may be cancelled by the company by mailing to the insured at the address shown on the policy a written notice stating when, not less than five days thereafter, such cancellation shall become effective and further provides that the mailing of such notice shall be sufficient proof of notice it is not necessary that the notice so mailed shall be received by the insured in order to be effective. If you find that the defendant Traders and General Insurance Company mailed a notice of cancellation to John and Jim DiMatteo they have done everything which the policy and the law requires of them and the policy ceased to remain in effect after the date specified in said notice regardless of whether or not the DiMatteos or either of them ever actually received such notice.'

Questions: First. Is the standard cancellation clause set forth, supra, which provides that cancellation may be effected by mailing notice, (a) ambiguous and/or (b) contrary to the public policy of the State of California?

No. It is the general rule that the parties to an insurance policy are free, subject to legislative restriction, to arrange the occasions, method, and means of cancellation by private agreement. (Ohran v. National Automobile Ins. Co., 82 Cal.App.2d 636, 645, 187 P.2d 66 (hearing denied by the Supreme Court).)

It is likewise settled that in the construction of a contract, the office of the court is simply to ascertain and declare what, in terms or in substance, is contained therein, and not to insert what has been omitted or omit what has been inserted. Code Civ.Proc. § 1858.

This rule is applicable to insurance contracts, as was pointed out by Mr. Justice Spence, speaking for this court, in New York Life Ins. Co. v. Hollender, 38 Cal.2d 73, 81(7), 237 P.2d 510, 514, where he stated: 'In construing life insurance policies as in the construction of other contracts, the entire contract is to be construed together for the purpose of giving force and effect to each clause. (Citations.) While it is settled law that in case of doubt the provisions of the insurance contract will be construed most strongly against the insurer (citations), the rule is equally well established that where the terms of the policy are plain and explicit, the court will indulge in no forced construction so as to cast a liability upon the insurance company which it has not assumed (citations).' (Italics added.)

(a) The cancellation clause in the instant case is clear and unambiguous; it means exactly what it says. It provides that the company may cancel the insurance by mailing at least a five-day notice to the insured at the address he has given the company. It expressly provides that such mailing shall be sufficient proof of notice and that the effective date stated therein shall become the end of the policy period.

It is to be noted that the clause further provides that 'delivery' of such cancellation notice shall be equivalent to mailing, thus making it clear that there are two methods of canceling the policy, one by mailing, and the other by delivering, notice of cancellation to the insured.

The clause is mutually available on the same terms to both parties to the policy. The unrestricted privilege of cancellation by either side exists for the benefit of the insured, whose interest in the covered property or need for protection may cease during the policy period, as well as for the benefit of the insurer.

In Automobile Liability Insurance, by Appleman (1938), in referring to a cancellation provision similar to that involved in the present case, the author said, at page 476: 'By the terms of the standard policy, mailing of notice is the determining factor in cancellation not the receipt of, or delivery to, the policyholder. Under other types of cancellation clauses this has been held perfectly valid and enforceable. Thus the policy is cancelled at the specified date if notice is properly mailed regardless of whether the notice is ever received by the policyholder.' (Cf. Savarese v. State Farm Mutual Automobile Ins. Co., 150 Cal.App.2d 518, 521(5) et seq., 310 P.2d 142.)

It is, of course, conceded that the Legislature, by statute, may prescribe that receipt of the notice is required for effective cancellation of an insurance policy. No such statute has existed, or now exists, in this state.

Referring to a similar cancellation provision in insurance policies, in 64 A.L.R.2d (1959), p. 988 et seq., it is stated: 'The fourth type of clause is represented by what is called the 'standard cancellation provision.' It stipulates that the policy may be canceled by the insurance company by mailing to the insured at his address written notice stating that in not less than 5 days thereafter such cancellation shall be effective. The specific provision is added that the mailing of notice shall be sufficient proof of notice and that the effective date and hour of cancellation stated in the notice shall mark the end of the policy. * * * The great majority of the cases hold and doubtless correctly so that under such provision the actual receipt of the cancellation notice by the insured is not a condition precedent to the cancellation of the insurance by the insurer in view of the fact that the express terms of the contract uphold the sufficiency of a notice deposited in the mail.'

Again, on page 1000, appears the following: 'Most of the more recent insurance policies contain a standard provision dealing with the cancellation of the policy by the insurance company. This so-called 'standard form' of policy cancellation clause reads as follows: 'This policy may be cancelled by the company by mailing to the insured at the address shown in this policy written notice stating when not less than five days thereafter such cancellation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice and the effective date and...